Though its outlook for the coming fiscal year is more positive, Sony today released a disappointing financial report for the year ending March 31. While its sales revenue stabilized, barely changing in comparison to the last fiscal year, the Sony group's net earnings fell off to the tune of 88.5 billion yen, a 23.4% decrease.

Sony's overall sales of game software fell 18.3% compared to the previous fiscal year. While PlayStation 2 software revenues increased, PlayStation software revenues fell considerably, and hardware sales dropped as well. Sony sold 20.1 million PS2s in the past fiscal year, some 2.4 million less than in the year before, contributing to a 40% decrease in operating profit for the games division. Sony also attributed some of that decrease to price drops early in the fiscal year, as well as increasing research and development costs for future projects like the PSP and its next game console.

The report did not include specific shipment numbers for the PSX game console/DVD recorder hybrid, instead lumping those numbers in with total shipments of all DVD recorder models, which numbered 650,000 units in the year ending March 31. However, group CFO Takao Yuhara noted that while the PSX sold well shortly after launch, sales in the months since have not lived up to expectations.

Looking ahead to the coming fiscal year, Sony expects an upturn to the tune of a 62% increase in group operating profit and a 13% increase in net profit, on the strength of expected benefits from its recent structural reforms and research and development expenses. That prediction isn't quite enough to satisfy analysts, however, who were looking for a 23% increase in net profit.

Sony expects its debuting PSP handheld to ship 3 million units worldwide by the end of March 2005, which it hopes will balance a continuing decrease in sales of other game hardware as the PlayStation and PlayStation 2 further saturate the market.

Sony's financial reports for the past year have consistently struck rather low notes, so it will be interesting to see how that affects its E3 press conference -- past E3 showings have usually reflected a practically chest-thumping confidence. New details about the PSP and Sony's next console could signal a significant turnaround, though, so we'll be sure to report back with all the details next month.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in 1UP.